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An $8,000 Tax Credit Is Yours If You’re Buying Your First Home!

Believe me, it’s a great time to become a first-time home owner. Why? Because, after the mortgage market crashed, the feds wanted to help us all out and get the whole system working again.

So, to re-energize the market, they hit upon a tax-credit program for first-time home buyers – an $8,000 one! And then they got even more generous when they decided you do not have to repay the $8,000!

The formal name of the program is The American Recovery and Reinvestment Act of 2009. Now, as you might expect because it’s a federal program, there are guidelines you’ll have to follow in order to qualify for and participate in the program. Those guidelines are described below:

Guideline 1

For the tax credit program, the IRS defines a first-time home buyer as someone who has not owned a principal residence during the three-year period prior to the purchase.

Guideline 2

The tax credit is equal to 10% of the home’s purchase price up to a maximum of $8,000.

Guideline 3

The credit is available for homes purchased on or after January 1, 2009 and before December 1, 2009. Remember, you only have four months left to enjoy the benefits of the tax credit!

Guideline 4 
If you’re a single taxpayer with an income up to $75,000, you qualify for the full tax credit. And, if you happen to be a married couple with incomes up to $150,000 (filing a joint return) you also qualify for the full tax credit.

What occurs if your income goes over those limits? The rule is this: the tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) of more than $75,000 for single taxpayers and $150,000 for married taxpayers filing a joint return.

According to the government, "the phase-out range for the tax credit program is equal to $20,000. That is, the tax credit amount is reduced to zero for taxpayers with MAGI of more than $95,000 (single) or $170,000 (married) and is reduced proportionally for taxpayers with MAGIs between these amounts."

Remember, this tax incentive is a true tax credit; you don't have to pay it back!

However, you must use the residence as a principal residence for at least three years or face recapture of the tax credit amount. Now here two questions I know you want answered.

What Kind of Home Qualifies for the Tax Credit?

You can buy any home that you’ll use as your principal residence! This includes single-family detached homes, attached homes like townhouses and condominiums, manufactured homes (also known as mobile homes) and houseboats.

Is the Application for the Tax Credit Complicated?

Not at all! It's as easy as it ever gets with the government. You simply claim the tax credit on your federal income tax return.

To get specific, you’ll need to complete IRS Form 5405 to determine your tax credit amount. Then, claim this amount on line 67 of the 1040 income tax form for 2009 returns (line 69 of the 1040 income tax form for 2008 returns).

There’s no requirement for any other applications or forms. Better yet, no pre-approval is necessary!

One Disclaimer: You can't claim the credit on Form 5405 for an intended purchase at some future date; it must be a completed purchase!

I’d love to help you participate in this wonderful program. Contact me at 402.680.2500 so I can answer any questions you have or provide you with more information! Remember, it ends December 1st of this year!